Tesla: Car of the Future, Hot Stock of Today

Why you should care

Tesla’s success in 2013 could mark a new beginning for auto manufacturing in the United States, but has its incredible streak been too good to be true?

By Oz Jungic

The Daily DoseOCT 23 2013

By any measure, Tesla Motors has had an incredible year. Back in May, around the time Tesla’s stock began its meteoric ascent, Consumer Reports gave the Tesla Model S its best ever review, commenting that “it outscored every car” in their test ratings. The car looks great, runs beautifully and what’s more: It’s electric.

Word must have spread because in the six months since that review, Tesla stock has skyrocketed. Followed by another, more recent surge after a Wedbush Securities in-house survey indicated surprising enthusiasm for Tesla’s Generation III model expected in 2017.

500

40,000

$90,000

Current Tesla sales aren’t just hurting the Prius; the company’s success is also making a dent in revenues for luxury cars . The booming company’s sales are concentrated largely in California, where over the summer Tesla outsold the sum of Lexus LS, Audi A8 and Porsche Panamera — and even bit into BMW and Mercedes revenues. Fortunately for these auto giants, Tesla’s plans for expansion aren’t limited to the United States.

In 2014 the firm plans to double its production to 40,000 vehicles per year, but at least half of these will vehicles will go to Europe and Asia. Even though sales are limited and outside the price range of many would-be owners, the company has developed its cultural capital by promoting Tesla as a satisfaction-oriented business and by nurturing its cool, futuristic brand.

When a video of a Tesla Model S on fire went viral on YouTube, CEO Elon Musk penned a thorough and transparent response. More recently he’s been in the news for buying James Bond’s submarine car from The Spy Who Loved Me and promising to make it real! Not a bad idea for the guy who’s selling the car of the future.

Clem Chambers identified Tesla as the new “bubble stock” and compared the company’s golden year to those at Apple and Netflix — before those bubbles burst.

But some investors are cautioning against overexcitement about Tesla stock. On CNBC Jeff Gundlach warned that while auto sales are on the rebound, car manufacturers can’t all be winners in terms of market share, adding that the “cultish aspect” to the stock wouldn’t necessarily translate into stable growth. Clem Chambers identified Tesla as the new “bubble stock ” and compared the company’s golden year to similar experiences at Apple and Netflix — before those bubbles burst, followed by a slow recovery.

What’s clear is that Tesla has the potential to change how we drive cars, or at least how the 1 percent drives cars. But will the company’s growth maintain its current pace, will its expansion throughout the United States and on other continents be as successful as in California, and will it come out with more affordable models — all the while keeping its cool? Only time will tell. Those of us who can’t afford to buy the car can think about buying a few shares — at least for now.